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House Democrats Introduce Overdraft Fee Bill

March 19, 2013

by: Lewis Wood

House Democrats introduced a bill Wednesday designed to address concerns about the overdraft fees banks charge consumers when a checking account is overdrawn.

The "Overdraft Protection Act," cosponsored by 46 lawmakers including the House Financial Services Committee's two top Democrats, Reps. Maxine Waters of California and Carolyn Malone of New York, would codify a 2010 Federal Reserve Board rule requiring consumers to "opt in" for overdraft protection.

It would also cap the number of fees institutions can charge an individual for overdrafts to one per month and six per year, and requires those fees to be "reasonable and proportional" to the amount of the overdraft.

In addition, the legislation would prohibit the ordering of debit charges from "high to low," a practice that's garnered numerous class action lawsuits, and directs the Consumer Financial Protection Bureau to study the use of overdraft fees with prepaid cards and potentially extend the bill's provisions to those cards if needed. (American Banker Online, March 21)